Monday, June 14, 2010

A Systems Approach to Business - Part 3

Note:  This is the third part in a three-part post on the subject of systems thinking in business.  To read the first two posts, go to Part 1 and Part 2.  To download the paper in its entirety, please go to the downloads section of

Defragging the Company

Moving focus from individual components to the overall system requires a significant amount of commitment and patience by the company's leaders.  The steps to begin the process of defragging a company include the following:
  • Promote the Generalists:  Move leaders from specialists to generalists to increase understanding and leadership of, people, information, material, products, and services- how they flow and work together to serve customers;
  • Coach & Mentor:  Coach and mentor people to increase the level of understanding throughout the company regarding how each job supports other areas in the achieving the fundamental purpose.  Those who work in support areas need to clearly understand that they exist solely to support the company's main processes that serve customers (which, by the way, doesn't make them any less significant to the company).

    When done correctly, value stream mapping (VSM) is an excellent tool to help clarify the company's high level system, including the interactions of people and teams;
  • Enable Relevant Feedback:  Implement a feedback system (e.g., a 360° system) that includes input from a person's internal customers, and is focused on improving performance - rather than documenting and blaming for poor performance;
  • Clarify Expectations:  Set objectives based on supporting achievement of high-level (companywide) objectives and tie incentives to company or division performance - or, if done extremely carefully, based on success in supporting improvement efforts.  Clarify expectations regarding participation in change initiatives and improvement activities and focus efforts on the company's overall success - create an obsession for satisfying customers.

    As an example, a reward system for the plant managers in Situation #3 from Part 1 based on companywide results rather than individual plant results can lead to improved teamwork and cooperation between plants, and improved results for the company.
It's the Big Picture that Matters

Since there are few, if any, who would argue that company performance matters more than individual or department performance, it becomes a question of whether individual performance can be accurately measured as a contributor to company performance.  Although it's perfectly natural to want to evaluate how much value an individual or team is contributing, most organizations are far too complex to do it with simple, one-dimensional measures.  Most people are intelligent enough to do what it takes to meet virtually any goal or make any measure look good - even if it detracts from overall company performance.  There are unfortunately numerous examples over the last several years of unethical or illegal behavior driven by internal or external company measures.  Putting these examples aside, however, I truly believe that most people care about the success of the organization but have learned what to do to survive in today's business world.

Fragmented thinking is one of the biggest barriers to long-term success for a company.  Moving to systems thinking requires a fundamental shift that many will be unable to do.  Communicating the vision, clarifying expectations, and continual coaching must replace dictating and obsessive measuring and evaluation of people as a management style.  If you've hired the right people and are consistent in your approach, your move toward systems thinking - as measured by continually improving financial results - will occur.

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